Government Home Loans

There are four main types of mortgage loans available to borrowers.

• Conventional loans

  Conventional loans are not insured or guaranteed by the government and are offered by private lenders. They may be conforming or non-conforming. Conforming loans guidelines are set by Fannie Mae and Freddie Mac and include loan limits and underwriting criteria. Non-conforming loans, or jumbo loans, exceed these traditional limits and often require a higher credit score and a larger down payment than government-backed loans.

• Government-backed loans

  Government home loans are insured or guaranteed by the Federal Housing Administration—FHA loans, the Department of Veterans Affairs—VA loans, or the US Department of Agriculture—USDA loans. They offer several benefits—lower down payment requirements, flexible credit criteria and competitive interest rates.

• Jumbo loans

  Jumbo loans are non-conforming loans that exceed the loan limits set by Fannie Mae and Freddie Mac. They're often used to finance higher-priced properties. Jumbo loans typically require a higher credit score, a larger down payment and more strict underwriting standards.

• Fixed-rate loans

  With fixed-rate loans, the interest rate remains the same for the entire loan term—15 or 30 years. They provide stability and predictability, as the monthly mortgage payment typically remains consistent over time.

The types of loans guaranteed by government include Federal Housing Administration, or FHA loans, the Department of Veterans Affairs, or VA loans, and the US Department of Agriculture, or USDA loans. These loans are designed to help certain groups of borrowers, such as first-time homebuyers, veterans or those living in rural areas access affordable financing options.

Government-backed mortgages are insured or guaranteed by government entities, making them more accessible and affordable for certain groups of borrowers.

Federal Housing Administration, or FHA-backed mortgages are the most popular government mortgage loans, offering more flexible terms and lower down payment requirements, while being particularly beneficial for first-time homebuyers and those with lower credit scores.

Mortgages backed by the Department of Veterans Affairs, or VA, are exclusively available to eligible veterans, active-duty service members and their spouses. These mortgages come with no down payment, competitive interest rates and no private mortgage insurance, or PMI, requirement.

Mortgages in rural and suburban areas may be backed by the US Department of Agriculture, or USDA. These types of mortgages are for homebuyers within these areas who have low to moderate incomes. USDA mortgages offer 100% financing, no down payment, lower interest rates and flexible credit requirements.

Loans guaranteed by the government provide opportunities for borrowers who may not meet the strict requirements of conventional loans. They offer more accessible down payment options, lower credit score thresholds and competitive interest rates. However, it's important to note that these loans also come with specific eligibility criteria and guidelines that must be met.

FHA loans are popular among first-time homebuyers and those with lower credit scores. This type of loan allows lenders to offer more flexible terms and lower down payments. Homebuyers typically put down as little as 3.5% of the purchase price. However, FHA loans require borrowers to pay mortgage insurance premiums, or MIP, throughout the life of the loan.

VA loans are exclusively available to eligible veterans, active-duty service members and their spouses. These loans offer benefits including no payment, competitive interest rates and no private mortgage insurance, or PMI. VA loans also have more lenient credit and income requirements.

USDA loans offer 100% financing, meaning no down payment is required. Lower interest rates and flexible credit requirements are additional benefits. To qualify for a USDA loan, the property must be located in an eligible rural area, and the borrower's income should fall within the specified limits.

Government-backed loans offer several benefits that make them an attractive option for borrowers. These benefits may vary depending on the specific loan program and individual circumstances.

• Lower down payments

  One of the most attractive benefits is a lower down payment, which makes homeownership more accessible, especially for first-time buyers who may have difficulty saving a large sum of money.

• Flexible credit requirements

  Government-backed loans often have more lenient credit score requirements compared to conventional loans. Borrowers with less-than-perfect credit may still qualify for a loan.

• Competitive interest rates

  Government home loans often come with competitive interest rates. This may save borrowers a substantial amount of money over the life of the loan. Plus, mortgage payments may be lower.

• Streamlined application process

  Government mortgage loans typically have a streamlined application process. The approval process is usually more efficient and faster than with traditional mortgage loans.

Consult with a mortgage professional or lender to get a full understanding of the advantages and eligibility criteria for government-backed loans.

Government home loans are designed to make homeownership more accessible and affordable. Your credit score plays an important role in determining your eligibility for a government home loan. While each authority has set required minimum credit scores, lenders may set their own minimum credit score requirements within government mandates. First Citizens requires a 640 minimum credit score for USDA loans and minimum score of 620 for FHA and VA loans.

It's important to note that while credit scores are important, lenders also consider other factors in your financial history, such as your income, employment stability and debt-to-income ratio.